US auto major Ford Motors will invest €812 million, or $1.2 billion, for its plant in the Valencia region of eastern Spain.
The investment will lead to the creation of hundreds of jobs, said Stephen Odell, chief executive officer of Ford Europe, at an event in Valencia.
Spain currently has an unemployment rate of 21 percent, way above the European Union Average.
Under the new plan, the carmaker plans to roll out at least 20 new or upgraded models in Europe and build next-generation Transit Connect and the Kuga model during the next three years, the carmaker said.
Car sales in Spain have slumped in recent months with the end of government incentives as the country embarks on an austerity drive to tackle its budget deficit.
Car sales fell 23.3 percent in May, the 11th straight month of decline, car association ANFAC reported earlier this month.